F. (1) Construct the NPV profiles for Project L and Project S. At what discount rate do the profiles cross? (2) Which project or projects should be accepted if they are independent? Mutually exclusive? Explain. G. (1) What is the underlying cause of ranking conflicts between NPV and IRR? (2) Which capital budgeting method should be used when NPV and IRR give conflicting rankings? Why?

CASE STUDY: Ashworth Textiles Your manager, the chief financial officer (CFO) for Ashworth Textiles, has just handed you the estimated cash flows for two proposed projects. Project L involves adding a new item to the firm's fabric line. It would take some time to build up the market for this product, so the cash inflows would increase over time. Project S involves an add-on to an existing line, and its cash flows would decrease over time. Both projects have three-year lives because Ashworth is planning to introduce an entirely new fabric at that time. The following are the net cash flow estimates (in thousands of euros): Year 0 1 2 3 Expected Net Cashflows Project L Project S (100) (100) 10 70 60 50 20 80 The CFO also made subjective risk assessments of each project, and he concluded that the projects both have risk characteristics that are similar to the firm's average project. Ashworth's required rate of return is 10 percent. You must now determine whether one or both of the projects should be accepted